<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 21, 1999
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Virtgame.com Corp.
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(Exact name of registrant as specified in its charter)
Delaware 0-29800 33-0716247
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(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
12625 High Bluff Drive, Suite 205A, San Diego, California 92130-2053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (858) 259-5015
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a Securities Acquisition Agreement and Plan of
Reorganization ("Agreement") dated December 21, 1999 by and among Virtgame.com
corp., a Delaware corporation ("Virtgame"), Primeline Gaming Technologies, Inc.,
a California corporation ("Primeline"), and the stockholders of Primeline
("Primeline Stockholders"), Virtgame acquired all of the issued and outstanding
common shares of Primeline in consideration of Virtgame's issuance of 447,208
shares of its common stock to the Primeline Stockholders.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
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PRIMELINE GAMING TECHNOLOGIES, INC.
Primeline was incorporated on October 6, 1999 and had limited activity
for the period from October 6, 1999 (inception) to December 31, 1999. Audited
financial statements for the period ending December 31, 1999 are presented in
the attached appendix.
<PAGE>
VIRTGAME.COM CORP. AND PRIMELINE GAMING TECHNOLOGIES, INC.
Pro Forma Condensed Consolidated Balance Sheet at December 31, 1999
and Statement of Operations
for the Year Ended December 31, 1999
(Unaudited)
The following tables present summary historical information
for Virtgame.com Corp. and Primeline Gaming Technologies, Inc. derived from
their financial statements. The acquisition of Primeline has been accounted for
using the purchase method of accounting and, accordingly, the assets acquired
and the liabilities assumed have been recorded at their fair values as of the
date of the acquisition, which do not differ significantly from historical
costs, except for property, consisting primarily of computer software, which has
been valued at $900,000, representing an increase of $900,000 from its
historical cost.
The unaudited pro forma condensed consolidated balance sheet at
December 31, 1999 and statement of operations for the year ended December 31,
1999 present the results for Virtgame and Primeline as if the acquisition had
occurred on January 1, 1999.
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VIRTGAME.COM AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Pro Forma
Virtgame.com Primeline Adjustments Pro Forma
------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash .......................................... $489,927 $8,996 $498,923
Restricted cash ............................... 150,000 150,000
Prepaid expenses and other assets ............. 86,014 86,014
----------- ------- -----------
Total current assets .......................... 725,941 8,996 734,937
Deposits ...................................... 18,930 18,930
Property and Equipment, net ................... 398,231 - (180,000)(2) 1,118,231
900,000(1)
Investment in subidiary ....................... 900,000 (900,000)(1)
----------- ------- -----------
$2,043,102 $8,996 $1,872,098
=========== ======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable .............................. $114,083 $12,204 $126,287
Accrued expenses .............................. 143,081 143,081
Funds held on deposit ......................... 52,762 52,762
Current portion of Capital lease obligation ... 7,928 7,928
Notes payable ................................. 198,876 198,876
----------- ------- -----------
Total current liabilities ..................... 516,730 12,204 528,934
Shareholders' equity .......................... 1,526,372 (3,208) (180,000)(2) 1,343,164
15,000 (1)
(15,000)(1)
----------- ------- -----------
Total liabilities and shareholders' equity .... $2,043,102 $8,996 $1,872,098
=========== ======= ===========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
<PAGE>
VIRTGAME.COM AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Year Ended December 31, 1999
Pro Forma
Virtgame.com Primeline Adjustments Pro Forma
------------ --------- ----------- ------------
Revenues ............... $ 384,673 $ 1,000 -- $ 385,673
Operating Expenses ..... 3,399,444 19,208 180,000(2) 3,598,652
------------ --------- ----------- ------------
(Loss) from operations . (3,014,771) (18,208) (180,000) (3,212,979)
Interest income ........ 11,454 11,454
Interest expense ....... (35,635) (35,635)
Foreign Exchange Loss .. (5,672) (5,672)
------------ --------- ----------- ------------
Loss before income taxes (3,044,624) (18,208) (180,000) (3,242,832)
Income tax expense ..... 2,887 2,887
------------ --------- ----------- -------------
Net Loss ............... $(3,047,511) $(18,208) (180,000) $(3,245,719)
============ ========= =========== =============
Basic and diluted net
loss per share ....... (0.34) (0.34)
Shares used to compute
basic and diluted net
loss per share ....... 9,024,792 409,162 9,433,954
Notes to the Pro Forma Condensed Consolidated Financial Statements:
(1) To eliminate investment in subsidiary and related equity account of
Primeline for consolidation purposes and to record acquired assets at fair
market value at date of acquisition
(2) To depreciate the software acquired from Primeline over 5 years
<PAGE>
(b) Exhibits.
Securities Acquisition Agreement and Plan of Reorganization
dated December 21, 1999 by and among Virtgame, Primeline and the Primeline
Stockholders.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Virtgame.com Corp.
(Registrant)
Date: March 28, 2000 By: /s/ Bruce Merati
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Bruce Merati, Chief Financial Officer
<PAGE>
PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
For the period October 6, 1999 (Inception) to December 31, 1999
<PAGE>
PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT..........................................F-1
FINANCIAL STATEMENTS
Balance Sheet...................................................F-2
Statement of Operations ........................................F-3
Statement of Changes in Shareholder's Deficit...................F-4
Statement of Cash Flows.........................................F-5
Notes to Financial Statements............................F-6 to F-8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholder
Primeline Gaming Technologies, Inc.
San Diego, California
We have audited the balance sheet of Primeline Gaming Technologies, Inc. (A
Development Stage Company) (the "Company") as of December 31, 1999 and the
related statements of operations, changes in shareholder's deficit, and cash
flows for the period from October 6, 1999 (inception) to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Primeline Gaming Technologies,
Inc. (A Development Stage Company) as of December 31, 1999, and the results of
its operations and cash flows for the period October 6, 1999 (inception) to
December 31, 1999, in conformity with generally accepted accounting principles.
San Diego, California PANNELL KERR FORSTER
January 27, 2000 Certified Public Accountants
A Professional Corporation
F-1
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 1999
ASSETS
Current asset:
Cash .............................................. $ 8,996
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Total current asset ............................... 8,996
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Noncurrent asset:
Property, net (Note 1) ............................ --
-----------
Total noncurrent asset ............................ --
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Total assets ...................................... $ 8,996
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LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable .................................. $ 12,204
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Total current liabilities ......................... 12,204
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Shareholder's deficit:
Common stock, no par value, 1,000,000
shares authorized, 100,000 shares issued
and outstanding ................................ 15,000
Deficit accumulated during development stage ............ (18,208)
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Total shareholder's deficit ....................... (3,208)
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Total liabilities and shareholder's deficit ....... $ 8,996
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F-2
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the period October 6, 1999 (Inception) to December 31, 1999
Revenue:
Consulting fees ................... $ 1,000
Operating expenses:
General and administrative expenses 19,208
--------
Loss before income tax .................. (18,208)
Income tax expense ...................... --
--------
Net Loss ................................ $(18,208)
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F-3
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT
For the Period October 6, 1999 (Inception) to December 31, 1999
Deficit
Accumulated
Common Stock During
---------------- Development
Shares Amount Stage Total
------- ------- -------- --------
Issuances of common stock
upon incorporation .............. 100,000 $15,000 $ -- $ 15,000
Net loss for the period October 6,
1999 (Inception) through December
31, 1999 ........................ -- -- (18,208) (18,208)
------- ------- -------- --------
Balance, December 31, 1999 ......... 100,000 $15,000 $(18,208) $ (3,208)
======= ======= ======== ========
F-4
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period October 6, 1999 (Inception) to December 31, 1999
Cash flows from operating activities:
Net loss ............................................ $(18,208)
Adjustments to reconcile net loss to net cash used
in operating activities:
Changes in operating liabilities:
Increase in accounts payable .................. 12,204
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Net cash flows used in operating activities ... (6,004)
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Cash flows from financing activities:
Proceeds from the issuance of common stock .......... 15,000
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Net cash flows provided by financing activities 15,000
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Net increase in cash ...................................... 8,996
Cash at the beginning of the period ....................... --
--------
Cash at the end of the period ............................. $ 8,996
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ............................................ $ --
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Income taxes ........................................ $ --
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F-5
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Primeline Gaming Technologies, Inc. ("the Company") was incorporated in
the State of California on October 6, 1999.
The Company has developed software that will provide an online closed-loop
sportsbook system but has not generated significant operating revenue as
of December 31, 1999.
On December 21, 1999, the Company entered into a securities acquisition
agreement and plan of reorganization (the "Virtgame Acquisition") with
Virtgame.com Corp.("Virtgame"). The Virtgame Acquisition resulted in the
sale of 100% of the outstanding capital stock of the Company to Virtgame
for a purchase price of $900,000 in return for the issuance of 447,208
shares of Virtgames' common stock. The purchase price was based on the
value of Virtgame's common stock on the date of the Virtgame Acquisition.
The Virtgame Acquisition has been accounted for by Virtgame as a purchase
at historical cost.
Subsequent to year end, Virtgame has finalized an installation and
maintenance agreement with a land-based gaming corporation in Nevada and
intends to market this software to other land-based casinos in the United
States.
REGULATION RISK
The Company intends to market its software in jurisdictions that do not
prohibit gaming over the Internet. There can be no assurance that the
Company will obtain government approval or be able to comply with future
government regulations that will affect gaming operations.
FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and accounts
payable approximate fair value due to the immediate short-term nature of
these financial instruments.
PROPERTY
Property consists of contributed computer software which has been recorded
at the contributing parties' cost basis of zero.
REVENUE RECOGNITION
Revenue is recognized when services are performed or when software is
sold.
F-6
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of
existing assets and liabilities. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE 2 - INCOME TAXES
Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income tax purposes. The tax
effect of temporary differences consisted of the following as of December
31, 1999:
Deferred tax assets:
Startup costs capitalized for income tax purposes $ 5,900
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Gross deferred tax assets ....................... 5,900
Less valuation allowance ........................... (5,900)
-------
$ --
=======
Realization of deferred tax assets is dependant upon sufficient future
taxable income during the period that deductible temporary differences and
carryforward are expected to be available to reduce taxable income. As the
achievement of required future taxable income is uncertain, the Company
recorded a valuation allowance. The valuation allowance increased by
$5,900 from October 6, 1999 (inception).
As of December 31, 1999, the Company has net operating loss carryforwards
for both federal and state income tax purposes. Federal net operating loss
carryforwards totaling approximately $3,500 expire in 2019. State net
operating loss carryforwards totaling approximately $3,000 expire in 2004.
F-7
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PRIMELINE GAMING TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 2 - INCOME TAXES (Continued)
A reconciliation of the effective tax rates with the federal statutory
rate is as follows as of December 31, 1999:
Income tax benefit at 35% statutory rate $(6,400)
Change in valuation allowance .......... 5,900
Non deductible expenses ................ 100
Other .................................. 400
-------
$ -
=======
F-8
